Very few people have a balanced budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year. on the first try.  This week, I’ll talk about how to refine your preliminary budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year. if it isn’t in balance.  I have been very fortunate in that it has been a long time since I found it challenging to meet my financial goals.  Also, I don’t know the specifics of any of your budgets, life-styles or financial goals. So, in this post, I will identify the changes you can make to refine your budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year. at a high level and provide links to articles by other financial literacy bloggers that provide a whole host of ideas on the specifics.  I hope that one or more of those articles will provide you with the ideas you need to successfully balance your budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year..

The Bottom Line

The number on which you’ll want to focus is the Grand Total on the BudgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year. tab.  If it is close to zero (i.e., within a percent or two of your total income) and you have incorporated all of your financial goals, you are done.  Otherwise, you’ll want to look at the section below that reflects your situation, i.e., whether the Grand Total is positive or negative, to learn how to refine your budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year..

Your Budget Shows a Large Positive Balance

Congratulations!  If the value in the Grand Total line of the BudgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year. tab shows a large positive number, you have more income than you are spending and saving.  You are among the fortunate few.

Before spending your excess income, you might want to review your financial goals.   Questions you could ask yourself include:

• Do I have emergency savings of three to six months of expenses?
• Are there other large purchases I’d like to make in the future?
• Do I have enough savings to take maternity/paternity leave?
• If you have children, am I saving for their education?
• Have I studied the full costs of retirement and am I saving enough?
• Have I contributed the maximum amounts to all of my tax-advantaged retirement savings accounts (IRAs and 401(k)s in the US, RRSPs and TFSAs in Canada)?
• Do I want to retire sooner (which would require more savings now)?

If you still have a positive balance after your review, you can consider increasing your discretionary expenses (possibly a newer car or a nice vacation or the addition of a regular treat).  Of course, there is never any harm in increasing your savings.

Your Budget Shows a Large Negative Balance

A large negative balance is much more common than a large positive balance.  I wish I could give you a magic answer to resolve this situation, but there are really only three options.

• Increase your income.
• Decrease your expenses.
• Borrow money either from a third party or by drawing down your savings.

Unless absolutely necessary, I suggest avoiding the third option.  If your expenses exceed your income and you make up the difference by borrowing either from your savings or a third party, you are likely to have a worse problem next year.  Unless either your income or expenses change, it can lead to a downward spiral.

Increase Your Income

Increasing your income can be a more effective way to balance your budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year..  However, it has its own challenges and often requires a significant investment of your time and/or money.   Examples of ways to increase your income include:

• Get a part time job, but make sure it won’t jeopardize your primary job.
• Work overtime if you are eligible.
• Make sure you are earning a competitive wage by looking at relevant salary surveys. If you aren’t, ask your boss for a raise, such as described in this post, or look for another job in your field that pays more or offers more benefits.
• Consider getting more education that will provide you with the opportunity to make more money in the future. Some employers will pay for some or all of your tuition if the additional education is related to your job.  This choice is likely to cause more pain in the short term, but can produce large benefits.  As an example, check out this post.
• Sell things that you don’t need. Here is a  post on this topic.
• Start your own business. This option is one that I suggest you pursue only very cautiously if you already have a tight budget.  Starting a business can be very expensive, which of course will put further pressure on your budget.  Also, a large percentage of new businesses fail which means the owners lose money. According to Investopedia, 30% of business fail within two years of opening and 50% fail within five years.  Of those that survive, one source indicates that many business don’t make money until the third year.  If you want to start a side business, turning a hobby into a business is one of the most fun ways to do so.  Here is an article with some suggestions on how to do so.
• There are hundreds of articles about “side hustles.” I’ve provided a few examples. There are lots of pitfalls with side hustles, including many that might end up costing you money rather than making it. So, as with starting your own business, I suggest exercising caution if you decide to proceed with one or more of them.
  • How to Make Money Fast Easy
  • Legit Ways to Make Money on The Side This Year

Decrease Your Expenses

To be blunt, it is hard to decrease your expenses.  Here are some tips on things to consider:

• Separate your discretionary expenses from your required expenses. Required expenses include the cost of basic housing, a basic car, gas, groceries, medical care, insurance and the like.  Discretionary expenses are things you could live without, even if you don’t want to.  Here are several posts I’ve seen that provide ideas on how to cut back on discretionary expenses.
  • 67 Great Frugal Tips to Make You Wealthier Today
  • What costs you two weeks of salary per year and starts with C?
  • How Much is Coffee Costing You?
  • Stop Wasting Money
  • 10 Stupid Ways I’ve Caught Myself Wasting Money
  • Are You Using It Until It Breaks?
  • 20+ Totally Awesome Money-Saving Tips– I caution you against #3. An accident in which your car is severely damaged or totaled could have significant consequences if you are already struggling to make ends meet.
• Review the amount you pay for your necessities to see if you can reduce any of these costs. Here are several posts that provide some ideas.
  • 40 Smart Ways to Reduce Your Monthly Bills
  • 5 Ways To Save $532.30 On A Tight Budget
  • This post focuses specifically on your cell phone bill.
  • This post discusses your energy costs.
  • I really like this post as it covers one of my biggest areas of savings – cooking at home instead of in restaurants. Here is another variation on the same theme.
  • Figure out how much you are spending to pay off your debts, particularly if you have a lot of credit card debt. Research ways to re-finance your debt to reduce interest rate or, if necessary, lengthen time to payment.  For example, if you have something you can use as collateral, a collateralized loan will have a much lower interest rate than your credit cards. See my post on loans to understand the factors that affect the interest rate on a loan and the sensitivity of your monthly payments to changes in interest rates and term.  This post has a lot of great information on re-paying student loans. I also like this post which talks about refinancing student loans – are you ready for it and some options.
  • There are dozens (hunderds?) of blogs on FIRE (Financial Independence, Retire Early). These bloggers tend to post their personal stories about how they are living very frugally so they can retire very early.  Although many of their approaches seem almost draconian, reading one of more of their posts might give you some ideas how you can cut back on your expenses.

There are a few other expenses you can adjust to balance your budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year., but I suggest you do them only after you have fine-tuned your budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year. and looked into re-financing your debt.

• Reduce the amount you set aside for savings. Clearly, covering the basics, such as food and shelter, take priority over meeting your longer-term financial goals.   Once you have covered those expenses, you’ll need to balance your short-term wants with your long-term goals.  For example, you’ll need to decide whether you want to spend more today on entertainment or put more into your savings so you can have the retirement you desire. The idea of foregoing things today to the benefit of something you will get in the future is called delay of gratification.  It is a difficult concept to implement in practice but is often a key to long-term financial success.
• Avoid taking on too much more risk. For example, one way to save money on insurance (cars, homeowners/renters or health) is to increase your deductible, lower your limit of liability or, in the case of car insurance, not purchase physical damage coverage.  As I discussed in my post on making financial decisions, these choices reduce your upfront cost, but can have serious consequences in an adverse situation.  If your budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year. is tight, you may not be able to afford to pay your full share of costs in the case of a serious accident, damage to your home or serious illness.

Closing Thoughts

Working to refine your budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year. to bring it in balance can be a real challenge. If you can’t do it on the second or third try, be patient with yourself. Learning to be financially responsible is often a long, challenging process.

You made it!  This week your only task will be to create a first draft of your budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year..  

Budgeting can be challenging as you try to balance your long-term goals with your short-term needs and wants.  As such, I suggest creating it in two steps. This week I’ll provide guidance on creating the first draft of your budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year..  Next week’s post will talk about how to refine it.

Practical Steps

To create your budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year., you will enter values in Column D of the BudgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year. tab of your spreadsheet.  As long as you don’t enter values in Column D of any of the “Total” rows, the formulas will automatically calculate those values.

While the spreadsheet was built to be fairly flexible, one of its weaknesses is that it is not easy to add or delete income or expense categories once you have started entering your budget amounts.  So, before you get started, I suggest making a final review of the line items on the Budget tab. If you need to make changes, you can look back at last week’s post for the instructions.

If you find you need to add or delete a line after you have entered budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year. amounts, here’s what you’ll need to do:

1. Make a note of the budgeted amounts of all of the line items you’ve entered.  
2. Add or delete the line item name according the instructions in the last week’s post.
3. Copy the formula from cell D110 to all of the cells into which you previously typed values.  You can copy a formula by:
   1. Going to cell D110.
   2. Holding down the Ctrl key and hitting C.
   3. Moving your cursor to cell D11.
   4. Holding down the shift key and then hitting the down arrow until all of the cells into which you entered values are highlighted.
   5. Holding down the Ctrl key and hitting V.
4. Re-enter the budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year. amounts that you noted.

If you don’t take this approach, some or all of your category names in Column A will change rows, but your budgeted amounts in Column D will stay in the same rows.  You’ll end up with a mismatch between category names and budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year. amounts.

BudgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year. Amounts

For each line item in your budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year., you’ll need to select a budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year. amount.  These selections will require your informed judgment. Things to consider in making your selection include:

• How much you’ve recorded in each category over the past several weeks, as shown in Column B.
• Any changes in your income or expenses you anticipate in the next several months.  
  • Some of these changes might result from life changes – a new job, moving, getting a roommate, getting married, having children or the like.
  • Other changes might result from intentional changes in your habits – fewer meals in restaurants, hiring a cleaning service, newly carpooling, among others.
  • You’ll also have changes from prior expenses if you change your spending or income to better align with your financial goals.
• If you’ve used the tax approximation, the amounts in Column C for Federal and State/Provincial income taxes.
• The goals you set as described in my post on setting financial goals.  You might want to increase one or more of your emergency savings, savings for a designated purchase (vacation, house, new car) or long-term or retirement savings.

Final Steps for This Week

Once you have completed your first draft, take a look at the value in Column D of the Grand Total row.  If that value is positive, it means you have more income than expenses and additions to savings. If it is negative, your expenses and savings goals are higher than your income.  Next week, I’ll talk about things you can do so the value is close to zero.

You’re almost there!  Only one more week until I describe how to create your budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year..  Before you can do that, you’ll want to make sure that the income and expenses you’ve entered don’t have too many mistakes.  In this post, I’ll talk about things to review to make sure you have an accurate starting point for your budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year..

Before getting to that topic, here are your budgeting tasks for this week:

1. Continue using and refining your expense tracking system.
2. Continue to enter your income and expenses into the spreadsheet.
3. Make sure to update the number of months you have been entering information on the Basic Inputs tab.
4. Review the first two columns of the BudgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year. tab, as described in the rest of this post.

Make Sure Categories are Right

Over the past several weeks, you’ve been entering the category name with each income and expense line item.  Mistakes I’ve made include using more than one variation on some of my category names, such as household expense and household supplies.  I also sometimes misspell one or more of category names.

If you’ve made similar mistakes, you’ll want to correct these mistakes so you have exactly one line in your budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year. for each type of income and expense.  Here are the steps to find and correct these mistakes:

1. Go to the BudgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year. tab.
2. Review the category names to see if there is more than one row in Column A that corresponds to the same category.
3. If there is, figure out which category name you want to use.
4. Make note of all of the incorrect names.
5. Go to each of the Bank Transactions, Cash Transactions, Credit Card Transactions, Less-Than-Monthly Expenses, and Income tabs.
6. Hold down the Alt Key and hit E.
7. Hold down the Alt Key and hit F.
8. Enter one of the incorrect names in the box next to “Find What.”
9. Hit the Find Next button.
10. Any time Excel finds the incorrect category name, replace it with the correct name.
11. Repeat steps 9 and 10 on each of the tabs listed in Step 5 until the incorrect label no longer appears on the BudgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year. tab.
12. Then repeat steps 6 through 11 for any other incorrect names.

You’ll know you are done when each category name appears exactly once on the BudgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year. tab.

Make Sure Amounts Look Reasonable

Once all of the category names appear only once and have the names you want, you’ll want to make sure that the values in Column B look reasonable.  These values are the totals of the values you entered on the various tabs, adjusted to either an annual or monthly basis depending on the choice you made in Cell B5 on the Basic Inputs tab.  Two reasons these amounts could look wrong are (1) you entered the wrong amount for a transaction or (2) you entered an incorrect value in the “How Many Times a Year” column.

If a number looks too high or too low, you can use the following steps to help find the problematic input:

1. Identify the category name in Column A of any value in Column B that looks too high or too low.
2. Go to each of the Bank Transactions, Cash Transactions, Credit Card Transactions, Less-Than-Monthly Expenses, and Income tabs.
3. Hold down the Alt Key and hit E.
4. Hold down the Alt Key and hit F.
5. Enter a category name that has an unexpected value in the box next to “Find What.”
6. Hit the Find Next button.
7. Look in the Amount column of any row in which Excel finds your category name.
8. Does the amount look right? Common entry errors are to transpose digits (i.e., enter them in the wrong order) and put the decimal point in the wrong place.
9. Fix any errors in the amount.
10. Look in the “How Many Times a Year” column.
11. This column can be blank for any row that contains an expense you pay every month.
12. For payments made less than once a month, the entries in this column should be the numbers of times per year you make payments of the amount shown. For example, if you pay your auto insurance bill twice a year, the semi-annual amount should be in the Amount column and 2 should be in the “How Many Times a Year” column.
13. Repeat steps 7 through 12 on each of the tabs listed in Step 2 until the amount on the BudgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year. tab for this category looks reasonable.

Next Steps

Next week, I will talk about how you can create your budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year. using the income and expense information you have tabulated so far and corrected.

Download Budgeting Spreadsheet Here

Your budget includes your income in addition to money you spend.  In my previous posts on the budgeting process, I talked about setting your goals and tracking and recording your expenses.  This week, I’ll focus on your paycheck and other sources of income.

Before getting to that topic, here are your budgeting tasks for this week:

1. Continue using and refining your expense tracking system.
2. Continue to enter your expenses into the spreadsheet.
3. Record the details from your pay stubs and any other sources of income.

Pay Checks

Your pay stubs include both your wages and some expenses and taxes that are deducted by your employer.  This information can be entered on the Income tab.  You’ll need your pay stub as it lists all of the items that flow into and out of your paycheck to get the net amount of your check or automatic deposit. Put information from each line on your pay stub in a different row on the Income tab of the spreadsheet.

The date of each paycheck goes in Column A.

Record the amount of each line item in Column B.  Your income, such as your wages, should be entered with positive numbers. Deductions, such as taxes, your share of employee benefit charges and retirement savings, should be entered using negative numbers.  Use one row in the spreadsheet for your wages and another for each of your deductions.

You can record the category for each line in Column C.  If you want to use the tax approximation included in the spreadsheet, you’ll need use the labels “Wages”, “Retirement Savings” “Federal Income Taxes” and “State Income Taxes” for each of those categories.  Otherwise, you can use whatever labels you want.

If you get paid less often than once a month, enter the number of paychecks you get each year in Column D of each row.  Otherwise, leave this column blank.

Other Sources of Income

If you have other sources of income you receive on a regular basis, such as returns on investments, disability income or support from your parents, you’ll want to include those in your budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year..  Unless you are on a leave from work or retired, you might leave any investment returns in your savings and not use them for spending. It is important to be aware of all sources of income in your budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year. including increases in your savings, so I suggest including them in your budgetA plan showing targets for income and expenses over a fixed time period, such as a month or a year. explicitly.

Interest, dividends and appreciation are the three most common types of returns from investments. If you have any such returns, enter their amounts in Column A, their category in Column B and how often you receive the amount from Column A in Column C.  The three types of returns are taxed differently in the US.  If you live outside the US or don’t want to use the very rough tax approximation in the spreadsheet, you can enter a single line item for total investment returns and call it whatever you would like.  Otherwise, enter “Interest” in Column B for interest payments, “Dividends” for dividends received and “Appreciation” for changes in the market value of your investments.  Appreciation can be either positive (market value has gone up) or negative (market value has gone down).

For any other sources of income, enter the amount, category (with a name of your choosing) and how often you receive that amount in Columns A through C, respectively.  Sources of income other than investment returns and wages will be ignored in the income tax approximation.

Download Budgeting Spreadsheet Here